Finding a business with significant growth potential isn’t easy, but it’s possible if you focus on a few key financial metrics. First, let’s take a look at the proven results. return One is growing capital employed (ROCE) and second is growing capital employed (ROCE). base of capital employed. This basically means that the company has a profitable endeavor that can be continually reinvested, which is the nature of compound interest.With that in mind, the ROCE elf beauty (NYSE:ELF) looks great, so let’s see what the trend tells us.
What is return on capital employed (ROCE)?
In case you aren’t familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. This formula for elf beauty is:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.22 = USD 132 million ÷ (USD 747 million – USD 152 million) (Based on the previous 12 months to September 2023).
So, elf Beauty’s ROCE is 22%. That’s an impressive return, and not only that, but it’s higher than the average 14% earned by companies in similar industries.
Check out our latest analysis on elf beauty.
In the chart above, we measured elf Beauty’s previous ROCE against its previous performance, but the future is probably more important. If you’re interested, take a look at our analyst forecasts. free A report on analyst forecasts for a company.
What are the return trends like?
Elf Beauty is showing some positive trends. This figure shows that over the past five years, the returns generated from the capital employed have increased significantly by 22%. The amount of capital employed also increased by 57%. Increasing returns due to increased capital is common for multibaggers, which is why we’re impressed.
However, for the record, the company’s current liabilities increased significantly during this period, so some of the increase in ROCE can be attributed to this. Current liabilities have increased to his 20% of total assets, so he now has more funding from suppliers, short-term creditors, etc. Be wary of future increases in the ratio of current liabilities to total assets, as this can introduce new risks to your business.
ROCE OF OUR TAKE ON ELF BEAUTY
In summary, it’s great to see that elf Beauty is able to double its revenue by increasing its rate of return and continually reinvesting capital. Because these are some of the key elements of the very popular multibagger. And because stocks have performed so well over the past five years, investors are taking these patterns into account. So we think it’s worth taking the time to see if these trends continue.
On another note, we discovered that Two warning signs for elf beauty You probably want to know.
If you want to see other companies making high profits, check us out. free Here is a list of companies with strong balance sheets and high profits.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.